Episode summary
Why Only a Handful of Venture Firms Will Win
How I Invest With David Weisburd
· · 1 hr 7 min · Hosts: David Weisburd · Guests: Aram Verdian
Summary
Aram Verdian argues venture capital has become a winner-take-all market because returns are extremely concentrated. Drawing on Accolade Partners’ database of more than 3,000 U.S. venture firms, he says fewer than 25 firms have consistently generated 3x net returns, and only about 20 have done so over roughly 20 years. His view is that venture outcomes are driven by a small number of companies producing most of the value, while most firms lack enough ownership, access, or discipline to make the math work.
He says persistence is strongest for larger, branded firms, while seed investing has become far harder because there are now thousands of managers competing for the same deals. In his framework, a seed manager needs a “right to win,” whether through technical expertise, niche-market specialization, or a network that can source the best founders early. He also argues that once a seed firm raises too much capital, it often loses the ability to do the same deals and gets squeezed into the “messy middle.”
Verdian says Accolade underwrites managers for durable 3x to 5x net outcomes, not for spiky home runs, and values lead or co-lead positions because ownership and fund math matter. He also thinks private markets, especially AI, have changed fundraising so much that more capital is flowing to a few breakout companies while late-stage venture keeps stretching out.
Key takeaways
- Aram Verdian says fewer than 20 U.S. venture firms have consistently produced 3x net returns out of more than 3,000 studied.
- He argues seed has become the most competitive part of venture, and only managers with a clear “right to win” can still win consistently.
- Verdian says a firm that grows too large can lose its seed advantage because it can no longer access the same deals or ownership.
- He underwrites for durable 3x to 5x net outcomes, not for rare 10x spikes, because consistency matters more for fund construction.
- He says lead or co-lead positions matter because fund math works far better when a manager owns enough to matter at exit.
Notable quotes
“there are less than 25 firms out of 3,000 that have consistently generated 3x net or better funds consecutively”
“there's less than 1% of the firms can consistently generate 3x net”
“Seed is much harder because a lot of the times if you're an inception check in a company the company is not known yet”
“if you are doing seed, you need to have what I call the right to win”
“we're underwriting on reasonable exit assumptions with where the manager is playing, their portfolio construction, their right to win, their team”
How the episode opens
Venture capital has never been more crowded. According to today's guest, it has also never been more concentrated. He believes the industry is becoming winner take all.
A handful of firms will capture a disproportionate share of the industry's returns. Everyone else will be fighting over what's left. Today's guest is Aram Verdian, partner at Accolade Partners and a former investor at Andre and Horwitz.
Without further ado, here's my conversation with Aram. Aram, you believe venture capital is becoming a winner take all market. What's underpinning that?
Yeah, and maybe I can unpack that a little bit because it sounds like a really strong statement. A couple of things I'll say in venture and you can go back many many decades. There's this concept of dispersion of returns where a handful of firms generate most of the returns.
So if you look at going back 40 50 years and you look at the value that's generated by ventureback companies, there's only a handful of firms that are participating in those companies at the early stages and own meaningful amounts on their cap tables. So double clicking on that if you look at the dispersion of the top desile top 5% in venture relative to the top quartile or the median that delta is larger than in other asset classes in the private markets. And so if you want to look more recently and our database has shown this we've looked at and our data is only US- based.
We've looked at over 3,000 venture capital firms in the US and our data has shown that there are less than 25 firms out of 3,000 that have consistently generated 3x net or better funds consecutively which tells you there's less than 1% of the firms can consistently generate 3x net.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venture capital concentration
- vc fund performance
- seed investing competition
- ai impact on venture fundraising
- late-stage investing and ipo delays
Companies and tickers mentioned
- Accolade Partners
- Andreessen Horowitz
- AlphaSense
Watch the episode
Watch “Why Only a Handful of Venture Firms Will Win” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from How I Invest With David Weisburd
-
Hunter Walk: Why Venture is Getting Harder, Picking Great Founders, and Investing Against Consensus -
True Anomaly’s Even Rogers on Space Warfare, China’s Military Advantage, and the Defense Tech Boom -
Finding the Next Anthropic, Quantifying Venture Capital, and the Science of Picking Winners -
Why 95% of AI Projects Fail, Anthropic still at $2T?, and Why AI Is Still in the First Inning -
Peter Thiel's 27-Year Partner on the AI Bubble, the Venture Capital Crisis, and the PayPal Mafia -
Why Venture Is Eating Public Markets, Picking Great VCs, and the AI Boom w/Brijesh Jeevarathnam
How I Invest With David Weisburd, this episode and its artwork belong to David Weisburd. Octagon is not affiliated with the show; this page is an independent summary.
